Ashok Leyland production holiday fuels slowdown fears

Ashok Leyland production holiday fuels slowdown fears


The automobile sector, facing poor demand, is moving at a very slow pace. After several auto firms announced cut in production and some going in for temporary closures, it was little surprise that Hinduja Group flagship Ashok Leyland on Monday announced that it would observe non-working days in five plants this month. The reason cited is "continued weak demand for our products".

It was only last month that Chennai-based TVS Group auto component maker Sundaram Clayton, automobile major Maruti Suzuki and two-wheeler manufacturer Hero MotoCorp announced suspension of production at their facilities in line with market demand.

Tata Motors and Mahindra & Mahindra also suspended automobile manufacturing to "adjust production with market demand".

The snail pace at which the demand is going is clear from the August figures. Passenger vehicle sales dipped 31.51 per cent year-on-year to 196,524 units. This is the 10th straight month fall. And according to the sector majors, this is the worst-ever fall data began to be scientifically recording from 1997-98.

The Hinduja group said the Ennore plant would have 16 non-working days, Hosur and CPPS five days, Alwar and Bhandara 10 days and Pantnagar 18..

Slowdown fears have been hovering for quite some time. A number of sectors have been awaiting stimulus packages. it was very recently that the Niti Aayog top official had said the economic situation was bad and the Government would have to take extraordinary steps. Finance Minister Nirmala Sitharaman had said the government had decided to remove the ban on official departments from buying new vehicles. This was expected to give an impetus to sales.

However, this does appear to have the desired impact and there does not appear to be much indication of things improving in the near future or else the majors would not have to go in for such drastic steps.

But, even if car sales have dipped, auto firms, especially Ashok Leyland sees a ray of hope in sale of medium and heavy commercial vehicles (MHCV). This is on the assumption that the Government's renewed spending on road projects should see the situation improve in this segment.